Egypt: Amendments to the Investment Law №8/199722 Mar 2016 2620 Views
There were many debates over the investment law in the Cabinet of Ministers before the Presidential Decree 17/2015 amended some provisions of the Investment Law 8/1997 on March 12, 2015 in the lead up to the Economic Summit in Sharm El Sheikh. In particular amendments touched base of Companies Law 159/1981, I
ncome Tax Law 91/2005, and Sales Tax Law 11/1991.
The new amendments are aimed at simplifying procedures, attracting investors to Egypt and offering incentives and guarantees. The new amendments are the following:
– Sales Tax and Customs Duties
– New provisions to be added to articles regarding general sales tax law on sales i.e. sales tax equal to 5% on machines and equipment that are used in production of goods instead of 10%; and the tax is to be returned after submitting the first tax report. And 5% of customs duties on import of machines and equipment becomes 2%.
– Free Zones
– Provisions of articles on free zones stipulate that a free zone shall be managed by a Board of Directors and its chairman which is appointed respectively by a decision issued by the Competent Administrative Authority. All the projects investing in the free zone shall be subject to custom and tax surveillance without prejudice to custom and tax exemptions dedicated to the established projects in the free zone. Meanwhile, it’s not allowed to provide a license to establish project through free zone system in the fields of cement industry, steel, iron, production of oil, the production, transportation of natural gas and other high energy consumption industries which shall be identified by a decision from the Cabinet of Ministers. Exported or imported goods from abroad by the free zones projects are not subject to customs tax, general sales tax or any other kind of taxes or duties. However, such projects shall be subjected to an annual fee of 1% (one percent) of the value of commodities entering the free zone in respect of warehousing projects and of the value of commodities on the exit from the free zone in respect of manufacturing and assembly projects. Duties for goods in transit are cancelled.
-Legal Infringements by the Management
– One of the amended articles is the subject to legal infringements committed by the management of a company. Executives cannot be sanctioned unless their knowledge and intentions are proved to constitute such a crime for their own interest or for the interest of others. A legal person can be sanctioned by a fine not less than 4 times of the stated fine by the law and shall not exceed 10 times equal of this fine. The license of the legal person can be suspended for a period of not exceeding one year. In case of recurrence, the license can be suspended or the company can be liquidated.
– Projects that depend on intensive labor activities or that work to deeply integrate the local components in its products, or that develop in logistics, internal trade, energy, agriculture, transportation, maritime and railways fields can enjoy different benefits such as establishment of their own customs ports, payback the whole value of a part of it providing the utilities to the project’s land, provision of projects with low prices, partial funding of technical programs for workers and social insurances, free of charge or discounted prices for the disposition of lands and building owned by the government.
-The One-Shop-Stop System
– Amendments to be added to the articles about regulation on obtaining approval and licenses for business (one-shop-stop system). Now investors can get it all in one place which is the General Authority for Investment (GAFI).
-Disposition of Land and Buildings
– A new chapter on the disposition of lands and buildings stipulates different forms of land disposition: sale, lease to own, lease, usufruct, in-kind sharing in the project. In cases where the disposition of lands is done by licensing easement paid system, the license shall be for a period of no more than thirty years and automatically renewed. The ownership of land does not move to an investor unless it is fully paid.
-The Investment Disputes
– One more new chapter is concerned with investment disputes. Three committees are created for this issue: The Grievance Committee, the Ministerial Committee on the Investment Disputes and the Ministerial Committee on the Investment Contracts’ Disputes. Such committees are established to settle disputes between investors and the government. For example, the Grievance Committee deals with complaints which can be submitted within 15 working days from the date of notification or knowledge of the appellant decree while a committee shall issue the decision within 60 days from the date of submission of the complaint; The Ministerial Committee on the Investment Disputes shall solve all submitted issues to it by a reasoning decision within 30 days after listening to all parties who express their points of view. The committee shall issue its decisions by the majority votes of those present, and in case the votes are equal, the President shall have casting vote; The Ministerial Committee on the Investment Contracts’ Disputes shall handle the search and study of the arising conflicts in between the investment contracts parties, and for that purpose and with the consent of the contracting parties, will process the needed settlement to fix the balance of these contracts, and expand the due times or periods or deadlines set forth therein.
The above amendments: reduction of sales tax, one-shop-stop system, criminal liability of the company, land disposition and dispute settlements will enter into force in the nearest future. The law is to be expected to expand benefits and privileges of investors and to help Egypt to develop in the right direction at the same time.